Government should make due preparations to deal with the betting by some hedge funds on the yuan's depreciation

The recent decline of the yuan's exchange rate against the US dollar, together with the negative growth of China's funds outstanding for foreign exchange, has sparked market concerns over the "retreat" of international capital from the country.

However, further evidence is needed before jumping to the conclusion that "hot money" is accelerating its exit from China. Whether the decline of the country's funds outstanding for foreign exchange is caused by the exit of foreign capital or by the outflow of domestic capital is yet to be confirmed.